Nov 14, 2016 Precision System Science Co., Ltd. SUMMARY OF CONSOLIDATED FINANCIAL STATEMENTS For the First Three Months of the Fiscal Year, Ending June 30 2017 (From July 1, 2016 to September 30, 2016) The English Edition is digested translation of Japanese financial statements, which are prepared in accordance with generally accepted accounting principles in Japan. Company Name: Precision System Science Co., Ltd. Listed Market: Mothers Code Number: 7707 URL: http://www.pss.co.jp/ 1. Consolidated financial data for the First Three Months of the Fiscal Year, Ending June 30 2016 (From July 1, 2016 to September 30, 2016) (1) Consolidated operating results (Million yen, fractional amounts rounded down to the nearest million yen) Net sales Operating income Ordinary income Quarter net income attributable to parent company shareholders Million yen % Million yen % Million yen % Million yen % September 30, 2016 781 (25.8) (171) ---- (175) ---- (179) ---- September 30, 2015 1,054 (4.5) (153) ---- (178) ---- (182) ---- (Reference) Comprehensive income: 185 million yen loss for the September 30, 2016 215 million yen loss for the September 30, 2015 Diluted net Net income income per per share share Yen Yen September 30, 2016 (8.64) ---- September 30, 2015 (9.82) ---- (2) Consolidated financial condition Net income Total assets Net Assets Equity ratio per share As of Million yen Million yen % yen September 30, 2016 5,359 3,205 59.8 154.43 June 30, 2016 5,820 3,432 58.3 163.37 (Reference) Equity: 3,205 million yen as of September 30, 2016 3,390 million yen as of June 30, 2016-1 -
2. Dividend Dividend per share 1Q 2Q 3Q FY end Total Yen Yen Yen Yen Yen FY 2015 ended June 30, 2015 ---- 0.00 ---- 0.00 0.00 FY 2016 ending June 30, 2016 ---- ---- ---- ---- ---- FY 2016 ending June 30,2016(Forecast) ---- 0.00 ---- 0.00 0.00 (Note) Revision to previous forecast of Dividend during the current three months: No 3. Business Forecasts for the fiscal year (From July 1, 2016 to June 30, 2017) Sales Operating income Ordinary income Net income attributable to parent company shareholders Net income per share Million yen % Million yen % Million yen % Million yen % yen First 6 months ending December 31, 2016 2,100 (10.5) (380) ---- (390) ---- (395) ---- (19.03) For fiscal year ending June 30, 2017 4,400 (1.3) (590) ---- (610) ---- (620) ---- (29.87) (Note) Revision to previous forecast of Business Forecasts during the current three months: No 4. Others (1) Change in scope of consolidated subsidiaries during FY 2017 ending June 30, 2016:Yes (2) Adoption of simplified accounting method or accounting method specify to quarterly period: None (3) Changes in accounting principles, changes in accounting estimation, retrospective restatement a) Changes according to the changes in accounting standards: None b) Changes other than a): None c) Changes in accounting estimate: None d) Retrospective restatement: None (4) Number of outstanding stocks (common stocks) a) Number of outstanding stocks (including treasury stock) 20,756,900 at September 30, 2016; 20,756,900 at June 30, 2016 b) Number of treasury stocks at the end of period None at September 30, 2016; None at June 30, 2016 c) Average number of outstanding stocks 20,756,900 for September 30, 2016 18,586,783 for September 30, 2015 * The above forecast contains forward-looking statements based on information currently available. Consequently the Company s actual results may differ materially from the projected values due to various future factors. - 2 -
Operating results and financial conditions 1. Analysis of operating results During fiscal year ended September 30 2016, the Japanese economy remained on a recovery path and began to show signs of a rebound in personal consumption and capital investment. World economies generally continued their modest recovery, but the outlook grew uncertain. In these circumstances, PSS Group has been focusing on manufacturing and sales of automated instruments (For sample preparation or fully automated machine) and related reagents or plastic consumables for laboratory and clinical diagnostic use. These products are on world-wide distribution network through OEM (Original Equipment Manufacturing) business with major clients such as Roche, QIAGEN, Abbott, Thermo Fisher, NanoString and LSI Medience, as well as our own brand distribution through PSS overseas subsidiaries in Europe and USA or domestic distributor. For the current consolidated fiscal period, the Net Sales decreased by 25.8% in comparison to the same period of previous fiscal year to 781 million yen and the Gross Profit decreased by 31.9% to 255 million yen. Although the sales of fully automated gene diagnosis system, genelead XII Plus which was sold last year have been steadly increasing, the sales of one OEM partner were postponed and its resumption has become uncertain. The sales of instruments decreased in comparison to the same period of previous fiscal year. With regard to the expenses, R&D expenses decreased by 15.8% in comparison to the same period of previous fiscal year to 132 million yen and other expenses decreased by cost cutting measures at the same time. Overall SG&A expenses decreased by 19.3% in comparison to the same period of previous fiscal year to 427 million yen. Consequently, the Operating Loss decreased from -153 million to -171 million. The ordinary loss is -178 million yen in comparison to -175 million for the same period of previous fiscal year and the Quarter net loss attributable to parent company shareholders is -182 million in comparison to -179 million for the same period of previous fiscal year. Sales by each product category: (Unit: Million yen) September 30, 2015 September 30, 2016 Year on year increase (Reference) Last Year Fiscal Amount ratio Amount Ratio % Amount Ratio Instruments 482 45.7 346 44.3 (28.2) 2,380 53.4 Reagent kits &Consumable 328 31.2 277 35.5 (15.5) 1,206 27.1 Maintenance 151 14.4 60 7.8 (60.0) 431 9.7 Customized product 91 8.7 96 12.4 5.6 439 9.8 Total 1,054 100.0 781 100.0 (25.8) 4,458 100.0-3 -
(1)Instruments During first three months ended September 30, 2016, the sales in this category decreased 28.2% to 346million yen. As the operating expenses decreased 23.5% to 367 million yen, the operating income decreased to -20 million yen (2million yen in the previous year). This category consists of 2 fields. (a)lab Automation This field consists of DNA extractors and other instruments in the field of Laboratory (R&D) Automation. The sales in this category decreased 26.1 % to 217 million yen. As the operating expenses decreased 21.1% to 211 million yen, the operating income recorded decreased 77.2% to 6 million yen. The sales is changing by OEM sales or inventory at quarterly. Although the sales are decreased to the same period of previous fiscal year, we do not concern about the results for continuous business with OEM partners. These are OEM business partners as follows; Roche:Leading global pharmaceutical manufacturers The Diagnostics Division is top runner for possession of PCR technology. PSS provides our OEM products to Roche Diagnostics GmbH for world-wide sales through Roche GP. QIAGEN:Leading global gene extraction manufacturers and recently focus on medical field. PSS provides our OEM products to QIAGEN Instruments AG for world-wide sales through QIAGEN GP. Thermo Fisher:Leading global molecular diagnostic company which have acquired Life Technologies Inc. that PSS provided our OEM products NanoString:Start-up company which possesses unique gene-related technology Diagenode: Start-up company which possesses unique reagent of epigenetics research (b)clinical Diagnostic Our business field is in the molecular diagnostic field whose market trend is shifting from R&D and laboratory automation field to clinical diagnostic field. Considering this market trend, PSS focus on clinical field. The sales in this category decreased 31.3% to 128 million yen. The operating expenses decreased 26.6% to 155 million yen, the operating loss recorded -26 million yen (-24 million yen in the previous year). Although the sales of fully automated gene diagnosis system, genelead XII Plus which was sold last year have been steadly increasing through OEM partner, the sales of one OEM partner were postponed and the sales is decreased compared to the same period of previous fiscal year. These are OEM business partners as follows; LSI Medience:Reagent maker in Mitsubishi group of companies and manage clinical test center Our OEM products are provided world-wide with Medical device approval Abbott:Leading global diagnostic manufacturers Global health care company which diversify the business in the field of medical, diagnostic, nutritional food. PSS provides our OEM products to Abbott Laboratories Inc. through Abbott GP. Elitech:Global molecular diagnostic company which provide gene-related reagent and the instruments and adopt our OEM products (Fully automated DNA testing instruments) Diasorin:Diagnostic reagent maker in Italy. Provide OEM products collaborated with their technology. ] - 4 -
(2)Reagents kits and Consumable This category consists of Reagent for sample preparation or exclusively designed plastic consumables (Tips and Cartridges) for those PSS instruments. Although most reagent is manufacture by OEM partners, plastic consumables is exclusively manufacture by PSS. Our reagent manufacturing facility Odate Reagent Center manufactures the reagent not only for some OEM partners, but also PSS. The sales in this category decreased 15.5% to 277 million yen. As the operating expenses decreased 12.5% to 286 million yen, the operating incomes loss was -8 million yen (1 million yen in the previous year). Although the sales of one OEM partner were postponed and the sales & revenue is decreased compared to the same period of previous fiscal year, the sales of other OEM partners are steadily growing. (3)Maintenance This category consists of revenue from system maintenance and sales of spare parts (replacement) exclusively. The sales in this category decreased 60.0% to 60 million yen. As the operating expenses decreased 58.6% to 53 million yen, the operating incomes recorded 7 million yen (67.4% decrease in the previous year). The sales of one OEM partner were postponed and the sales & revenue is decreased compared to the same period of previous fiscal year that had requested us to order a lot of spare parts for product sales on a full scale. (4)Customized product This category consists of Customized product sales except for PSS by NPS which is the manufacturing subsidiary company. The sales in this category increased 5.6% to 96 million yen. As the operating expenses decreased 3.3% to 92million yen, the operating income recorded 4 million yen (-3 million yen in the previous year).this segment is not our main business, but also gaining business for NPS (5)Others This category consists of sales except above 1~4 which is mainly PSS capital, Bio Contents Fund LLP, which have been dissolved for obtaining excellent results. The sales in this category are none. As the operating expenses decreased 27.3% to 0 million yen, the operating income loss recorded -0 million yen loss (-0 million yen loss in the previous year). - 5 -
2. Analysis of Financial Conditions: Assets, Liabilities and Net Assets (1)Assets In the first three months of current fiscal year, total assets decreased 460 million yen from the amount as of June 30, 2016 to 5,359 million yen. Cash & deposits decreased 372 million yen, Account receivable-other decreased 386 million yen and other assets decreased 111 million yen. (2)Liabilities Total liabilities decreased 233million yen to 2,154 million yen compared with the amount as of June 30, 2016. Current portion of long-term loans payable decreased 51 million yen, long-term loans payable decreased 51 million yen. (3)Net Assets Total net assets were 3,205 million yen, decreased 226 million yen compared with the amount of as of June 30, 2016. With net profit for the period, retained earnings decreased 179 million yen for Quarter net loss attributable to parent company shareholders. 3. Business Forecasts for the fiscal year (From July 1, 2016 to June 30, 2017) We do not change our business forecast for this fiscal year for considering current financial results and status. - 6 -
Consolidated financial statements Current assets (Assets) (1) Consolidated Balance Sheets (Thousand yen) As of June 30, 2016 As of September 30, 2016 Cash and deposits 2,631,875 2,259,728 Notes and accounts receivable-trade 1,003,447 617,443 Merchandise and finished goods 931,418 1,143,461 Work in process 90,536 163,082 Raw materials and supplies 129,902 197,478 Deferred tax assets 6,669 4,717 Others 262,879 151,129 Allowance for doubtful accounts (2,080) (1,494) Total current assets 5,054,648 4,535,547 Noncurrent assets Property, plant and equipment 708,506 764,705 Intangible assets 1,489 3,612 Investments and other assets 55,764 55,917 Total noncurrent assets 765,759 824,235 Total assets 5,820,407 5,359,782 Current liabilities (Liabilities) Accounts payable-trade 539,543 534,320 Short-term loans payable 470,000 470,000 Current portion of long-term loans payable 343,428 291,941 Income taxes payable 28,793 9,467 Provision for bonus 14,753 43,049 Others 272,371 158,178 Total current liabilities 1,668,889 1,506,957 Noncurrent liabilities Long-term loans payable 618,278 567,215 Deferred tax liabilities 45,455 45,120 Liability for pension 53,321 ---- Provision for product warranties ---- 6,286 Others 2,388 28,757 Total fixed liabilities 719,443 647,379 Total liabilities 2,388,333 2,154,337-7 -
(Thousand yen) (Net assets) Shareholders equity As of June 30, 2015 As of September 30, 2016 Capital stock 2,972,609 2,972,609 Capital surplus 880,204 880,204 Retained earnings (366,472) (545,914) Total shareholders equity 3,486,340 3,306,899 Other comprehensive income Foreign currency translation adjustment (95,382) (101,454) Total of comprehensive income (95,382) (101,454) Minority interests 41,115 ---- Total net assets 3,432,074 3,205,445 Total liabilities and net assets 5,820,407 5,359,782-8 -
(2) Consolidated Income Statements (Thousand yen) September 30,2015 September 30,2016 Net Sales 1,054,451 781,966 Cost of sales 678,551 526,043 Gross Profit 375,900 255,923 Selling, general and administrative expenses 529,637 427,451 Operating income and (loss) (153,737) (171,528) Non-operating income Interest income 143 64 Subsidy income 132 5,202 Gain on forfeiture of unclaimed dividends ---- 3,105 Tax Refund 1,986 ---- Others 256 498 Total non-operating income 2,518 8,870 Non-operating expenses Interest expenses 3,926 3,284 Foreign exchange loss 14,499 9,323 Stock delivery expenses 8,424 ---- Others ---- 0 Total non-operating expenses 26,850 12,608 Ordinary income and (loss) (178,068) (175,266) Extraordinary income Gain on sales of fixed asset ---- 9 Total extraordinary loss ---- 9 Extraordinary loss Loss on sales of fixed asset ---- 561 Loss on disposal of fixed asset 270 98 Total extraordinary loss 270 659 Income before income taxes and others and (loss) (178,339) (175,916) Income taxes-current 12,287 2,061 Income taxes-deferred 10,787 1,463 Total income taxes 23,074 3,524 Net Income and (loss) (201,414) (179,441) Minority interests and (loss) (18,872) ---- Quarter net income attributable to parent company shareholders and (loss) (182,541) (179,441) - 9 -
(3) Consolidated Comprehensive Income Statements (Thousand yen) September 30,2015 September 30,2016 Net Income (201,414) (179,441) Other comprehensive income Other gain from revaluation of securities (3,248) ---- Foreign currency transaction adjustment (10,574) (6,071) Total of other comprehensive income (13,823) (6,071) Comprehensive income (215,237) (185,513) (Breakdown) Comprehensive income attributable to owners of parent company (194,669) (185,513) Comprehensive income attributable to minority income (20,567) ---- - 10 -